
The Calendar Options second-quarter return trounced the S&P 500 as well as VTY (link below). Our Model Portfolio return was 15.46%, compared to –3.65% for the S&P and nearly –4% for VTY. Overall, market conditions differed little from the first quarter, so it looks like our latest strategy refinements are proving successful. Nevertheless, we continually use feedback from our monthly, quarterly, and annual results to improve the strategy and adapt it to long-term changes in market conditions (more about this…
Fri, Jul 23, 2010
People are excited about tail risk. On the institutional side, banks and asset managers are packaging up complex, multi-asset hedging products and selling them to pension funds, endowments, and other natural longs. On the retail side, Barclays and others are getting great traction with products like VXX, VXZ, VXX options and now XXV (see Bill’s helpful overview of this space). I’m hoping to join the fray, too, with a managed account program and subscription product set to launch in the next…
Wed, Jul 14, 2010
Felix Salmon is doubtful about whether it is possible to hedge tail risk, and I wholeheartedly agree with the data he cites showing that, of eight major asset classes, only volatility and managed futures offer genuine non-correlation to market returns. In fact, I’ll go a step further: I’m not that enthusiastic about the benefits of managed futures, at least in their current form. As a registered commodity trading advisor, I’ve seen the sorts of strategies that most of my peers are…
Wed, Jun 30, 2010
Equity investors who want a broad-based hedge have essentially three vehicles from which to choose: equity index options (SPY, SPX, ES, etc.), VIX futures (or their ETF permutations), and VIX options. In this piece, Larry McMillan makes the case for using VIX options instead of SPX derivatives, and this is his best argument: In my opinion, the purchase of VIX calls is a much better, more dynamic way, to approach protection. That is because VIX will explode whenever the market declines sharply,…
Mon, Jun 28, 2010
The iron condor newsletter returned 6.44% in the second quarter this year, easily beating both the Volatility Arbitrage benchmark (-3.97%) and the S&P 500 (-3.65%), with a lower maximum draw-down for the year and superior 1-year rolling returns. The newsletter portfolio value made a new all-time high. Although our strategy is almost entirely rule-based, every strategy ultimately requires human input, even if it is at a high level of decision-making. In the case of mechanical or rule-based strategies, perhaps the most important…
Wednesday, July 21, 2010